Amarillo Gold Corp.

In the 1990s, companies were closing Brazilian gold mining operations in great numbers. The low cost of gold – $300 an ounce – made many operations uneconomic. However, with an ounce of gold today worth more than five times that amount, many old and new mining companies show renewed interest in the country’s resources.

“The market has been agreeing with us,” says Frank Baker, project development manager at the junior exploration company Amarillo Gold Corp., which was founded in 2003. “The price has gone up more than most people expected. A lot of people expected it to go up but not to the extent that it has.”

The mining environment is especially favorable in Brazil, where the strong economy and mining-friendly government have encouraged several companies to redevelop old mines and search out new discoveries. “We are always looking for a good deal,” says Richard Brown, director of business development. “Right now, property is pricey in the market because everybody wants in on Brazil.” Fortunately for Amarillo, it already has found a couple of good deals.

Fortunate Finds
At its greenstone belt Mara Rosa project in the state of Goias, Amarillo has drilled 26,311 meters among 253 exploration holes. The 60,000-hectare site at its Posse Deposit has two main interest zones: Posse North and Posse South. As of April 18, Amarillo had recorded 623,000 ounces of gold indicated and 451,000 ounces of gold inferred. It is conducting a pre-feasibility study for Mara Rosa that it will release in August.

“We have just determined what we thought we had, we do have,” Baker says. “It seems to be what we predicted as we drill deeper and deeper.” Amarillo hopes to produce gold at Mara Rosa by 2013.

A BHP Billiton predecessor discovered the deposit in 1982. It was sold in 1992 to Western Mining, which operated an open pit for three years. Metallica Brasil Ltd. bought it in 1998 and conducted small-scale drilling.

“It was mined for a short time but was terminated because in those days the price of gold was only $300 an ounce,” Baker says. “The local currency, the Real, was high against the dollar, so a number of gold mines were shut down.”

At its Lavras do Sul site located in Rio Grande do Sul, Amarillo Gold is exploring two relatively untouched zones: Butia and Cerrito. The company began its drilling project in December 2006 and to date has announced 215,000 ounces indicated and 308,000 ounces inferred. Thus far, Amarillo has tested five of 19 known prospects and four have returned significant gold values. All are of adequate distance from one another to operate as separate open pits, and close enough to utilize one processing plant.

“It’s a very substantial target, and we are very hopeful that we can find several million ounces,” Baker says. “At Mara Rosa, we have one million ounces with some expectation for more, but at Lavras do Sul we are hoping for considerably more than that, which we believe we can do.” The company describes the 190-square-kilometer land package as a large, low-grade gold resource.

“We are finding gold in soil over large areas,” Brown says. “We find one target and another near that and another half-a-kilometer away will pop up. We have several targets there. We could drill at Lavras for another five years, and we’d still have drill targets to test.”